The Bank of England’s Monetary Policy Committee [MPC] has hiked interest rates from 1.25 per cent to 1.75 per cent, after eight of its nine members voted in favour.
The 0.5 per cent rise is the highest single increase of rates recorded since 1995 and takes interest rates to their highest level since December 2008, which was during the global financial crisis.
Mortgage payments are increasing as a result, increasing more pressure on households as the Bank scrambles to temper inflation.
It is reported that homeowners with an average standard variable rate mortgage are set to see their monthly payments increase by £59.17, while typical tracker rate mortgage customers will see their monthly rates rise by £51.98.
Meanwhile, inflation forecasts by the Bank have now been recalculated, with the rate of price rises expected to now peak at 13.3 per cent this year. Inflation currently stands at 9.4 per cent.
In respect of the changes, the Bank has said that it expects the UK to enter recession in Q4 of 2022 and continue to contract until the end of 2023, with the average energy bill set to hit almost £300 per month in October this year.
Such a lengthy economic downturn has not been seen since the 2008 crisis.
The Bank said: “The latest rise in gas prices has led to another significant deterioration in the outlook for the UK and the rest of Europe".
Bank of England governor, Andrew Bailey, added that the energy price rises and the Russian invasion of Ukraine were blame factors for the “exceptionally large” risks around the new economic forecasts.